Bailout Agency Squirrels Away Over $2 Billion

By STEPHEN LABATON,

Published: April 26, 1992

WASHINGTON, April 25—
While attacking Congress for delaying spending authority for the savings and loan bailout, the Bush Administration has managed to squirrel away more than $2 billion to keep the operation going.

Most members of Congress, which approves appropriations for the Resolution Trust Corporation, the agency that oversees the bailout of the savings industry, had assumed that the corporation ran out of money on April 1.

Administration officials have said on many occasions that the R.T.C. was out of money, and they, as well as officials of the corporation, had not disclosed the fund's existence for fear that news of the $2 billion fund would reduce any sense of urgency that could impel Congressional action. Money From Earlier Measure

Asked by a reporter what effect the stalemate over appropriations has had on the corporation's operations, the Administration officials disclosed the existence of the fund. They said the $2 billion came from an earlier spending measure and was enough to keep the agency going for a few months. "I hate to say it, but $2 billion is not a lot of money," said Stephen Katsanos, a spokesman for the trust corporation.

The money was set aside last fall by the corporation because it feared that political gridlock on Capitol Hill would delay any replenishment of its funds. The $2 billion has enabled the corporation to continue selling assets and seizing additional savings institutions since April 1, when most of its spending authority expired.

For all the secretiveness, there has been no suggestion of wrongdoing, and some members of Congress said they were surprised but not upset to learn about the money.

Congress returns Monday from a two-week recess but has shown no inclination to move quickly to provide new money. Some lawmakers and regulators said it could be weeks, or longer, before the trust corporation is given new money, and it is clear from their comments that the partisan bickering will continue. In interviews on Friday, Democrats, Republicans and Administration officials described no change in the political dynamics.

Always a difficult political issue, financing the highly unpopular bailout has run into a brick wall, even though everyone acknowledges that Congress will ultimately have to provide more money. Bickering between the Administration and House Democrats this election year, combined with an internecine Republican struggle, has blocked quick passage. The Administration says the House should provide more money; the Democratic leaders say they will not seek Democratic votes until the Administration enlists strong Republican support, so that the Democrats cannot be singled out as the driving force behind the financing.

The regulators said they debated the tactical merits of setting up the $2 billion fund and ultimately decided the fund would be needed because Congress had previously delayed acting on spending measures.

"If you wanted to play brinksmanship this was unwise," said one senior bailout official who asked not to be identified. "But if you wanted sound policy, this was the only way to go. So the agency decided to squirrel away some money, which is now down to about $2 billion."

Before the recess the House overwhelmingly rejected legislation to allow the trust corporation to spend $17 billion that had been approved in November.

The $17 billion remains unspent from $25 billion approved on condition that it be used by April 1. The $25 billion spending measure brought the total appropriations for the bailout to $105 billion, not including interest costs and the cost of the rescuing institutions during the Reagan Administration.

Counting those items too, some Government auditors have estimated the total costs at more than $500 billion over 40 years.

Savings associations can still be seized and their assets sold, but the Government cannot shut, transfer or sell many of the institutions without more money to cover the deposits of insured customers. Bookkeeping Criticized

"The bookkeeping in this process is so extraordinary," said Representative Jim Leach, Republican of Iowa, and a ranking member of the banking committee.

And Representative Charles E. Schumer, the Brooklyn Democrat who is also a member of the banking committee, said: "It will wait until crunch time, which is when the agency really cries out that there is a crisis. The President says it's up to Congress. That means he's not governing. If he thinks we will pass it without some leadership from him, he's wrong."

But Deputy Treasury Secretary John E. Robson said there was little more the Administration could do.

"Why the hell are we responsible for coming up with a new approach when we have put in a bill of our own, and we came up with four others," he said. "The House has got to get up off its rear end and do it. They have a responsibility to do it."

Mr. Robson said the inaction by Congress was costing taxpayers $2.5 million a day, based on the costs of running the 46 institutions now in Government hands. Since the agency was created in 1989, it has rescued depositors at 651 institutions.

The Senate passed a spending measure in March. In an effort to get the legislation back on track in the House, Representative Henry B. Gonzalez, the Texas Democrat who heads the House banking committee, will meet with other Democrats on the committee on Wednesday.

Fearful that it might provide Congress with another reason to delay new financing, the Administration has also decided to postpone its decision about whether to adopt a controversial plan that would rescue the owners of weak, but solvent banks and savings associations.

The proposal has both supporters and detractors in the House but was generally thought to hurt chances of a financing measure. The Administration is expected to decide whether to carry out the plan shortly after Congress provides more money.

Representative Bill McCollum of Florida, the Republican who led the revolt in his party against the Administration's request, said he would continue to fight against new financing if it did not include a provision that would require the Government to give $2.5 billion to 53 savings and loans with strong earnings but weak balance sheets.

He contends that helping these institutions would prevent them from failing and costing taxpayers $25 billion. Administration officials say such a plan would little more than an unnecessary windfall to the industry.

"Our frustration is not just with the Democrats, it's the Republicans, too," said T. Timothy Ryan Jr., the director of the Office of Thrift Supervision, which regulates the savings industry, and has come out against Mr. McCollum's plan.

Photo: "The bookkeeping in this process is so extraordinary," said Representative Jim Leach, Republican of Iowa and the ranking member of the banking committee. (Stan Barouh); John E. Robson, Deputy Treasury Secretary, said inaction by Congress was costing taxpayers $2.5 million a day, based on the costs of running the 46 institutions now in Government hands. (The New York Times) (pg. 28)